As Republicans wrangle over the “one big beautiful bill” for taxes and spending, bigness itself has become a political headache for the GOP, which controls Congress by only the narrowest of margins. In light of those coalition pressures, congressional Republicans are considering a more modest tax bill. If they do pivot to a more focused bill, however, Republicans need to keep populist priorities in mind.

In 2024, Republicans ran on a sweeping programme of tax cuts, including extending the 2017 Trump tax cuts and ending taxes on tips and overtime. But all that costs money, and the GOP now risks being torn between deficit hawks (who want more budget cuts to pay for those tax cuts) and moderates (who fear blowback from cutting programmes to the bone).

Republicans floated and then seem to have retracted future Medicaid reductions, which populists like Josh Hawley and moderates like Susan Collins had opposed. On the other side of the ledger, the populist firebrand Steve Bannon has been banging the drum for a tax hike on the wealthy. Such a tax increase would shatter the economic orthodoxies that have guided Republicans for decades, and President Trump himself has flirted with endorsing it, though he has recently backed away from it.

In contemplating raising taxes on the top earners, Bannon and other populists demonstrate a shrewd understanding of political dynamics. There are real political dangers in a tax-and-spending bill that could in any way be read as cutting benefits for working-class Americans while also slashing taxes for the rich. The 2017 Tax Cuts and Jobs Act, for instance, has not polled particularly well. In fact, Trump’s poll numbers were at a low when the bill was being debated and passed. That said, an electorate lukewarm on a tax cut might be revolted by a tax hike. Ever since George HW Bush’s broken “no new taxes” pledge, Republicans have been averse to any tax proposal that would increase marginal rates.

What could a “one targeted beautiful bill” look like? One path would be to extend (even if not making permanent) all the tax rates from the 2017 Tax Cuts and Jobs Act. This could even be staggered, with lower-income tax cuts having a longer term than others. If Republicans passed even a four-year extension of the rates for the top tax bracket, they could still claim to have avoided raising taxes on this group — and leave for the next president the long-term question of tax rates on millionaires.

Beyond those marginal tax rates, additional tax cuts could be designed based on how Republicans can get the most populist bang for their buck. For instance, increasing the state and local tax deduction (SALT) has been a major ask for many suburban Republicans, but it mostly benefits upper-income earners. Likewise, “no taxes on tips” has been a talking point on the stump, but it at best functions as a limited subsidy for workers in a handful of industries — benefitting waitresses and Uber Eats drivers but not doing much for Walmart clerks, farmers, and factory workers. Conversely, expanding the child tax credit would be a boon to working families across the board, and it could boost manufacturing at home (a key administration priority) to restore the ability of businesses to immediately deduct their spending on research and development.

A targeted populist tax cut might take those differences into account — by, for example, accepting a temporary boost to SALT if needed to get the bill across the finish line but making permanent an expanded child tax credit.

Beyond taxes, Republicans also need to build out a broader populist legislative agenda. The tax bill is at most a first step toward — rather than the culmination of — a realignment policy programme.

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